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From an employer’s perspective, April 7, 2006, marked a not-so-happy 20 th birthday for COBRA. No cause for celebration, no gifts, no cake or ice cream either. It is well established that COBRA participants cost plans considerably more than their nonCOBRA counterparts. And yet, after two decades of educating more than 250,000 agents, employers and administrators, we continue to see recurring mistakes that cost them even more.
The top five COBRA errors we see are:
- COBRA time frames that are incorrectly extended. Coverage extensions require timely, written notice from qualified beneficiaries. Often, employers accept such notice when it does not meet those requirements contained in the General Notice. Disability extensions are among the most costly and the most avoidable.
- Poorly worded COBRA notices. We continue to see employer notices that do not contain the updated verbiage in the Final 2004 DOL regulations. These defects can mean a quick loss in a lawsuit or DOL investigation.
- Failure to terminate coverage when COBRA allows. Many employers fail to precisely manage the 30-day payment grace period and overlook other permissible reasons for terminating coverage early (e.g., Medicare Entitlement).
- Insufficient tracking of COBRA time frames. Most employer effort is focused on the front end of COBRA. As a result, it is not uncommon to see some qualified beneficiaries receive several months of additional coverage (and claim payments) before the mistake is discovered.
- Mishandling of COBRA notices and inability to document they were sent. When a former employee suffers a health setback and has not elected COBRA, this is the usual refrain: “I never received the notice.” Many employers struggle to prove the Election Notice was sent, and thus have to provide retroactive coverage.
Mistakes like these result in litigation every day. Legal fees typically run up to $50,000 or more if a case goes to trial. Employers also face the prospect of daily fines and penalties, attorneys fees and medical claims expenses. In one case, a simple COBRA failure cost the employer more than $1 million! Even an employer’s legal victory can be costly in terms of time, effort, reputation and its own legal fees.
That is why our nationally recognized COBRA seminars always contain a discussion of recent lawsuits, which are invariably the result of poor COBRA administration. Almost without exception, employers who lose do so not on the basis of a new regulation or interpretation but on the basis of established COBRA principles.
The core of the problem is inadequate training. The employee responsible for COBRA administration usually has a variety of duties, and COBRA is rarely at the top of the list. Training tends to be last minute and on-the-job, frequently conducted by someone leaving the company. COBRA procedures often are passed down from employee to employee without question, explanation, monitoring or updating.
This is where Infinisource is at its best. We can help at a relatively low cost that surprises many employers. We are capable of handling all aspects of COBRA administration, including documentation, premium billing and carrier reporting. We have experienced operational, sales, technical and legal staff on hand to take care of all facets of COBRA.
If you have any concerns related to COBRA, please feel free to contact us to explore potential solutions. After all, COBRA is a 20-year-old headache for which Infinisource has a proven and effective cure.
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